Startup mentors discuss strategies and challenges of creating a new business.

Elliot Geidt: Don’t Be the Used Car Salesman

GUEST MENTOR Elliot Geidt, vice president of Redpoint Ventures: In the last year alone, I’ve had the pleasure of working with founders from more than 750 different startups. As you can imagine, there is quite a variance in the quality of these “pitches” — and I’m not talking about the quality of the company here – I’m talking about how the entrepreneur structures his presentation and communicates his vision.

The pitch is not just about presenting information to investors; it is also indicative of how you are going to sell to customers, communicate with employees and recruit top candidates. Further, a strong pitch is often a sign of a founding group’s emotional intelligence – a quality I value considerably.

That said, the biggest piece of advice I can offer you with is simply not to pitch. Here’s the thing: No one likes to be sold to. It never feels balanced or genuine and often triggers skepticism (think of the used car salesman). From the moment an entrepreneur starts talking, investors are trying to calibrate his or her credibility, which is hard to do if he or she is overly sales-y or refuses to recognize areas of improvement for the business (which all companies have). It is remarkably refreshing to hear entrepreneurs occasionally say “I don’t know” or for entrepreneurs to deliver a balanced description of the business that highlights not only strengths but also key risks.

Any thoughtful VC will uncover weaknesses in the business during the diligence process. You may as well hang a lantern on the issues upfront and discuss how you will manage those risks. This will also establish a strong sense of trust with investors.

Here are a few more “words of wisdom” to ensure that the style and substance of your pitches don’t get in the way of a great company:

Get to the bottom line

I would suggest the following: your opening salvo with investors should be two or three declarative sentences stating exactly what your company does, what pain point it addresses, and how it is unique and compelling. You can then spend the remainder of the presentation getting into the details. But if you don’t get to the key points early on, investors are inclined to lose focus. And if you can’t summarize your company in a few sentences, it may indicate there are broader issues with the value proposition.

Don’t tell us what we already know

Avoid general or high-level slides – these are almost never helpful. A recent entrepreneur building a mobile app spent the first five minutes of his pitch to our company discussing very generally how large and important the “mobile” opportunity is, including multiple slides showing various mobile device growth metrics. Let’s put it this way: if you’re sitting down with investors who need education on general topics like this, you’re with the wrong investors. Spending time on painfully obvious topics wastes time and makes you appear as if you don’t know your audience.

Back up your financials

Demonstrating great products and large markets is important, but so is demonstrating how your product will capture economic value. This is often one of the weakest areas for entrepreneurs.All founders should be able to answer these questions:

How much does is cost to acquire a customer? How has this trended and where will this go over time?

What is the dollar value of a customer? What churn rate and gross margin does this assume?

What are the unit economics of the business? Here you should be able to explain the revenue, gross margin, and gross contribution for the incremental sale of your product. How does this scale over time and why?

Be up to speed on industries specific metrics (for example, widely discussed terms for SaaS companies include MRR/ACV/TCV/Churn/CAC ).

Most great founders know these figures cold – and generally they can defend them ruthlessly.

If you’re looking for funding, undoubtedly you’ve spent endless days and nights getting your idea and company going. So spend some time making sure that you nail the pitch to bring the right investors on board who understand and support your vision. If you walk into a pitch unprepared or are too focused on the “sale,” chances are it won’t work out. You owe it to yourself to make sure your pitch is rock solid and representative of who you are and what you can build.

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